The AUD/USD pair continues to slide sharply, extending losses for the third consecutive day. The downward trend persists during the first half of the European session, pushing spot prices to a nearly three-week low at around 0.6620.
On Friday, the US Dollar (USD) gains momentum, reaching its highest level since July 10. This surge in the USD exerts pressure on the AUD/USD pair.
The release of robust US macro data, including the Advance Q2 GDP print and Weekly Initial Jobless Claims, indicates a resilient US economy and raises the likelihood of further interest rate hikes by the Federal Reserve (Fed).
Fed Chair Jerome Powell’s recent comments hint at the need for a slowdown in the economy and labor market before inflation can stabilize at the 2% target.
This scenario keeps the possibility of a 25 bps rate hike in September or November wide open, fostering an increase in US Treasury bond yields. The benchmark 10-year US government bond yield crosses back above the 4.0% threshold, supporting the strength of the Greenback.
Furthermore, worsening US-China relations overshadow the positive Australian CPI print released on Thursday, diverting flows away from the China-proxy Aussie. Technical selling below the 200-day Simple Moving Average (SMA) further contributes to the bearish trend in the AUD/USD pair.
Market participants are advised to await confirmation of further selling below the 0.6600 level before considering a continuation of the recent rejection from the 0.6900 neighborhood. Investors are now looking to the release of the US Core PCE Price Index, the Fed’s preferred inflation gauge, later during the early North American session.
This data may influence market expectations about the Fed’s next policy move and, coupled with broader risk sentiment, could drive short-term trading opportunities surrounding the AUD/USD pair.
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